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OTELP Plus Second Volume - July - 2013
&
Concept on Promotion of Community Based Organization(SHG, SHG Federation, Apex Federation)
Guidelines on Rural Financial Services
Odisha Tribal Empowermentand Livelihoods Programme
2nd Floor, TDCCOL Building, Bhoi Nagar,Bhubaneswar – 751 022Ph: 0674 – 2542709, Fax: 2541772www.otelp.org
SECTION-I Overview of Microfinance 3
SECTION-II Conceptualizations of CBOs 5(SHG, SHG Federation&Apex Federation)
PART- A Promotion of Primary Institutionat village level 6
PART- B Promotion of Secondary Institutionat MWS level (SHG Federation / Cluster) 7
PART- C Promotion of Apex Federation at Block level 8(Cooperative /Apex Federation)
SECTION-III Time frame of promoting People Institution 9
SECTION-IV Management 10
PART- A Operational Management 10
PART- B Financial Management 11
1) Apex Federation 11
2) SHG Federation 12
3) Group Level 12
SECTION-V Management Information System 13
SECTION-VI Management of Rural Financial Service Fund 14
PART- A Criteria for seed capital disbursement to SHG 14
PART- B Designing loan product 15
PART- C Criteria for Loan Sanction and Disbursement 15
PART- D Process to be followed for sanction 16& disbursement of loan to SHG
SECTION-VII Lending Principles to be followed 17
PART- A SHG Level 17
1) Norms
2) Loan Appraisal
3) Members' Eligibility
PART- B SHG Federation Level 18
1) SHG Eligibility criteria to avail linkages
2) Loan appraisal process
SECTION-VIII Proposed Business Model 19
SECTION-IX Sustainable Exit Strategy 21
CONTENT Page No.
TABLE OF CONTENTS
Designed & Printed by:Graphic Cell0674 2551295
Published by:OTELP
Content:Mary Bina SurinDipti Ranjan GantayatGoutam Kumar Mohanty
Guidance:Shri Susanta Nanda, IFSProgramme Director, OTELP
Photography:OTELP
Overview of Microfinance
Poverty is multifaceted and is widely perceived as multi-
dimensional complex phenomenon. It remains one of the
severest blights of humankind. Poverty varies from one
geographic area to other depending on various factors and
so is the case for development. The unmet needs of rural
communities, low purchasing power and lack of alternative
sources of livelihood are among the factors responsible for
rural poverty, especially in developing countries. Absence of
a poor friendly financial service is understood to be a critical
component to it. Though mere access to financial services by
poor is tough to claim as a solution to poverty, its role cannot
be undermined either, by looking at the fact that
microfinance has already reached millions of poor across the
world. Professor Muhammad Yunus and Grameen Bank of
Bangladesh has strengthened this belief with the pioneering
“peer-group joint liability” model, which is believed to be the
founding stone of the recent days microfinance. SHG-Bank
linkage model is the single largest microfinance approach
covering about 30 million poor household in India, which is
built primarily around group liability principle.
While efforts from various institutions in the state towards
poverty reduction and women's empowerment have not
been lacking, the impact has fallen short of expectations at
many places. Despite being one of the most naturally
endowed states in terms of natural resources, Orissa has
one of the highest incidence of poverty in the country
.Scheduled Tribes and Schedule Castes constitute a large
portion accounting to 38.25 % the state's population and
22.13 % of tribal population of the country (2001 census).
Though women constitute an important segment of the labor
force, the unpaid economic activities of women and their
contribution in the domestic sector remain unreported and
go largely unrecognized. While the self-help movement in
Odisha has been a direct consequence of the goal towards
empowerment, under the present circumstances, a lot
remains to be achieved in terms of overall improvement of
women's lot. In spite of its vast outreach, major limitations
attached to this approach are very low credit support vis-à-
vis the requirements, lacks scope in addressing the
diversified growth need of individuals, a large number of left-
outs, and mounting loan pressure on women.
Self Help Groups (SHGs) are viewed as voluntary associations; self managed homogeneous groups who usually engaged in weekly savings at village level. Their
savings are used for which for their own use such as consumption or productive purposes. This can be further supplemented by external resources, i.e. bank credit or support from financial institutions. The SHG movement, a structured approach with defined focus on women's empowerment came with the launching of Mission Shakti, W & CD Dept. in 2001. Odisha has 540029 SHGs( status of MF in India, 2011-12) .Out of this majority are defunct. Few groups ,which are still functioning, are either with the support of Government programs and NGOs handholding support. The ideology of SHG formation has diluted over time and the majority of group functioning is limited to the collection of monthly saving through unorganized meetings, no maintenance of books of records and limited to opening a saving accounts. SHG have expressed that, one of the reason that motivates them to form SHG has been entitlement to government subsidy schemes. Such groups have hardly succeed to manage funds and the majority of
them dissolve after misusing the amount, thus the main
vision of being together with mutual support, financial
intermediation, livelihood and empowerment fails. SHGs movement is yet to see a remarkable success in terms of promoting self-sustained women institutions successful in improving their livelihoods by having easy access to small credit at an appropriate time. In this scenario: building capacities of SHG and creating Community Based Organisations is highly essential.
SHG strength has proved to be magnificent, involving women in planning and decision-making and helping them to gain increased access and control over the economic resources is ultimately utilized for their family's development. This is the reason behind Government's consistent efforts to strengthen SHG and its federation and implementing development initiatives through them. Women, organising in informal institutions like SHG provides a platform for them to expand their horizons and outlook towards social issues. SHG movement has helped women to overcome social and economic barriers, may it be home or community. One has to understand how participating in peer lending groups develops “social and economic capital” in poor communities to building upon group strengths. To build the SHGs into an efficient and sustainable micro-finance institution, able to function independently and meet the needs of its members, it must foster sustainable financial features such as members' satisfaction and confidence, balance between simplicity, flexibility and manageability, clarity of roles of SHG members and service providers, equality of opportunities for all members and compatibility with the mainstream systems. Further strengths of SHG such as managing risks through peer pressure creating corpus for bank linkages and strong social collateral can back up the emerging financing institute.
ST&SC Development Department of Odisha has taken steps to provide support for tribal empowerment. It believes
SECTION –I
“The Aim behind promoting CBOs (SHGs,
SHG Federation and Apex Federation) is to
provide financial access and, services to the
poor women through self managed
institutional frame work .This will ensure
better quality of life to women, enhanced self-
image, enhanced status for female members at
the family and social level . It visions for
empowerment. There is no perfect solution to
a cause. One has to design and consistently
work with new strategies to overcome the day-
to-day challenges and aim towards
sustainability and quality of the institutions”.
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that, enhancement of their capacity and capability will enable them to take up various livelihood activities in a sustainable manner. It launched the “Orissa Tribal Empowerment and Livelihoods Programme” on 2nd October 2004, operating in 30 blocks in seven districts of Odisha. The emphasis has been building capacities and capabilities of Implementers and stake holders for effective implementation of project components, building institutions and nurturing them to take charge of themselves and majorly focusing on improving the livelihood of house hold through improved agriculture, land
and water management initiatives. Rural Financial Service has been a critical and valuable input to the household. The Organisation perceives that providing access to financial resources by women can play a major role in development . This guideline on RFS is an effort to strengthen such group liability based SHG approach of micro-finance and establishes sustainable CBO so that they can manage their own funds and also be capable enough to access banking services and overcome limitations for the overall effectiveness of micro-financial services. The first part of the guidelines deals with conceptualization of CBO, different levels of pyramid, their structure, operational and financial management, staffing pattern and governing body selection. The second part deals with RFS scope and management, lending principles. A business model and sustainable exist strategy will help to five the final shape.
PART- A:
Promotion of primary institutions at village level
“Self Help Group”
Groups can be promoted or nurtured with the
following objectives:
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The process has to begin with mapping of the existing
families under SHGs fold and left outs, analysis on the history
of the old defunct group, bringing de-railed groups to the
mainstream on a village wise approach. Adhering to
NABARD guideline, the left out families situated in close
proximity, same hamlet, and homogeneous in terms of
economic status, can be organized as fresh SHGs. There is a
need to start with detailed information gathering and analysis
of group's current status and develop strategies accordingly.
As group dynamics vary from one group to other, detailed
analysis on the history of the old defunct group should be
done to understand their savings status and credit
outstanding. Members from old SHG with no financial
backlog can form fresh SHG, .SHG with old financial back log
have to be streamlined first for the above processes. Efforts
can be made to bring women representing all household to
be a part of SHG .SHG promoted by FNGO or any other
agency within the operational areas of OTELP can come
under OTELP fold. Groups functioning should be focused
and streamlined by having regular meetings .Meetings should
bring forth social and financial issues and not limit to saving
collection. The first and foremost responsibility of the SHG is
thrift collection and fulfilling small financial needs of the
members through effective internal lending. SHG can be
facilitated for linkage either from the bank or RFS if there is a
need or in situations when SHG could not fulfil the financial
requirements of the members. Peer pressure in the group is
the mantra for better repayment of loan, functioning,
management and brings solidarity among all members.
Self help and mutual trust among all members
Mobilising small amount of monthly thrift &fulfil their
small financial
Providing space for leading a team
To avail loan from the bank to met out their
requirements
To have a feeling of “Own money” concept
It acts as an instrument for the poor
This is not just the end rather the beginning to
have a linkage for livelihood initiative. The
group needs to develop capabilities at the
group and individual level. Household level
livelihood planning with Individual members
should be complemented by the group's assistance for
developing concrete plans incorporating everybody's
livelihood needs. The promoter/ CSP and social experts
have a significant role to play. S/he has to develop processes
for carrying out strong internal credit appraisal. He has to
enforce repayment discipline, help the group develop a
livelihood vision and create collective excitement and
motivation. It needs a deep understanding of livelihood
strategies of individual members and formulates coping
strategies. For risk management, identification of avenues
where collectivisation can benefit individual plans, constantly
re-visiting and revising strategies and planning need to be on
an ongoing process. Money is a serious matter. Unless
groups, first, develop clear norms for managing their group
activities it is likely to experience misunderstandings, lack of
trust, unfair practices and corruption. Norms refer to
meeting processes, savings and lending procedures, account
keeping and follow up in a transparent manner.
Governing Body at SHG Level: 2 leaders will be either
selected or elected from SHG and nominated for 2/3 years
as per SHG norms.
a) Good performing SHG –performance will be assess by
the SHG Federation
b) It may joined with nearby SHG Federation
c) The SHG must be functioning at least six months
d) Depositing entrance fee as mentioned above
e) Agree to follow the norms set by the SHG Federation
Eligibility criteria of SHGs to be a part of SHG
Federation
The structure of the CBO (SHGs, and SHG Federation
&Apex Federation) is like pyramid with bottom to top
approach. The SHG is the primary institutions, and the rest
are the secondary institutions. The bottom that implies to
the SHG, holds the maximum responsibility and functions. It
is the foundation of the structure with sole responsible for
savings and credit. Gradually moving towards the top leads
to an increase in responsibility of monitoring, evaluation and
coordination with external institutions for better operation
and functioning. The process is facilitated by these
institutions. The relevance of the structure is better
understood with the role and responsibility at each level and
the total members constituting each level to maintain the
institute. The three types of institutions such as SHG, SHG
Federation and Apex Federation will be located at village,
MWS level and block level respectively. A pictorial
representation of the visualized structure below is for ready
reference and guide for the rest of this document.
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Block Level
MWS Level
Village Level
Apex FederationMinimum of (75-100
SHGs/750-1000 members)
SHG FederationMinimum of (10-20 SHGs
/ 100-200 Members)
Self Help Groups(10-20 Members)
Structure of Community Based Organisations
SECTION – II
Introduction:
Conceptualisation of CBOs
(SHGs, SHG Federation & Apex Federation)
PART -B:
Promotion of cluster level organisation at MWS level
“SHG Federation”
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There is a need to provide a continuous support to the
group on regarding issues that they might not be sure how to
deal with. The best set of people to give them a second
opinion in this regard are obviously the members of other
groups, who may already have undergone a similar
experience. Therefore it is essential to create a forum,
where all the groups are able to meet at regular intervals to
provide each other support as required. This emphasizes the
need of cluster level organization / SHG Federation. The
SHG Federations is formed at the micro-watershed level
(MWS). 10-20 SHGs approximately under different villages
of a MWS can be federated. Looking at geographical
situation such as being in the service area of the same bank
branch or served by the same village haat make its easy for
operation. The federation is not necessarily confined within
a VDC boundary; rather, it's planned to be operated in
MWS level in a GP. Its important that a group is stabilized
and mature enough before it becomes a member of another
forum. Preferably a group with six months of age should be
invited to attend cluster meeting.
The objectives of the SHG Federation will be:
Providing facilitating services to all SHGs that comes
under federation
Providing limited and quick financial assistance to the
SHG with proper process
Recommending for linking with external agencies or RFS
Cross learning and cross sharing to get exposed to new
challenges
Best platform for SHG Gradation and conflict Resolution
A matured cluster will provide the women a feeling of being
part of a larger whole, a collective of SHGs. This will boost
their confidence, creates a platform to face and deal with the
world and broadens their horizon local issues. SHG
Federation at MWS level is a forum for interface, forum for
solidarity, creating structure, design and bond among SHGs.
The federation altogether requires a different set of inputs
and assistance to operate much different purpose as
compared to the SHGs, or a group of SHGs just coming
together. The federation will try to deliver maximum
services i.e. ensuring regular monthly meeting, record
updating, regular savings and repayments and federation also
ensure the proper end use of the loan amount.
In order to stabilized cluster formation and make it a
meaningful platform, one has to look at parameters such as
frequency of meeting, agenda of meeting, norms (systems of
meeting, procedures, timings, and rules to control aberrant
behavior, membership fees, etc.) for systematic functioning
of the forum with structured interaction. Members should
take charge of the meeting to express, build rapport with
each other, share issues, solve problems together in small
groups and improve themselves to be better institutes.
Promoter should gradually disengage once the group learns
to functions independently. The role of the cluster has to be
strongly brought forward as a monitoring and evaluation cell
taken through participatory approach. This will evaluate the
group's performance over time and set targets to achieve.
Supervising the progress (socially and financial) of each
group, checking disciplining deviant behavior; imparting on-
going assistance in resolving issues and providing support in
any kind of need should be the broad functions.
Governing Body of SHG Federation:
2 leaders from each SHG will represent general body
of SHG Federation and attend monthly federation
meeting at MWS level.
2 leaders will be either selected/elected from this 20-40
leaders of general body of SHG Federation for 2/3 years
as per SHG Federation norms
Agree to pay service charge
Up to one year they can not avail loan from RFS fund
CSP will provide the necessary support on regular basis
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Eligibility criteria for non OTELP SHGs to access
services from Apex Federation
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PART-C:
Promotion of block level federation
“Cooperative or Apex Federation”
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Approximately 70-100 SHGs in a particular block,
irrespective of the organization behind its promotion can
come under OTELP promoted Apex Federation. Efforts
may be taken to bring all members in a SHG into this Apex
Federation fold. At the block level the Apex Federation will
be registered under either of the legal act i.e. Society
registration Act 1860, Indian Trust Act 1882, Cooperative
Society registration Act 1962. Promoting and legalising the
institution would let the organisations function on its own
without the support of external agency. Even after the exit of
the programme and external person (CSP/ social experts)
this legal institution will manage its fund and programme
locally. Apex Federation at the block level helps in catering
different types of services and activities to different
institutions that come under its geographical periphery.
SHGs promoted in non-OTELP areas under the same GP
may be included in SHG Federation
The objectives behind promoting Apex Federation are:
Legal identity
Ensuring social deliverables
Apex level collaboration
Providing services in terms of facilitating, controlling and
monitoring
Collective marketing
Facilitating for financial linkages in terms of loan & insurance
Taking ownership
Peer pressure
Programme will sustain for long
The Apex Federation will provide two types of support to its
members or SHGs. First is business activity and marketing.
Group of people having the same kind of livelihood may
come under one business. Accordingly the Apex Federation
needs to decide how many types of business activities to be
introduced. Secondly, extending technical expertise to
individual members as well as SHGs as a whole i.e. for SHG
conducting meetings, updating records, facilitating for loan
linkage along with other linkages. Apex Federation can earn
income from its business and marketing activities. A certain
amount of service tax may be levied on the SHG or
Individual members who are availing services from Apex
Federation.
Governing Body of Apex Federation: 2 leaders from each
SHG Federation will be representative of the general body
of Apex Federation. On an average, 20 leaders will be a
representative general body of Apex Federation. Among
them, 7-11 leaders are elected as Board of Directors
(BODs) of Apex Federation and among 7-11 BODs, 2 will
be elected as office bearer (executive body / Signatory).
Staffing pattern of Apex Institution:
1 Block Integrator (social expert) at block level and 10 CSPs
(1 CSP for each SHG Federation at MWS level) appointed
by OTELP office will be monitored by the leaders of the
Apex Federation at block level. All cadres of institutions
need to be promoted as per the institutional promotional
plan. Financial implication may be supported by OTELP for
managing the unit for seven years. But the concerned FNGO
need to work out on sustainability of Apex Federation from
the beginning i.e. chalk out sustainable plan of Apex
Federation while preparing VDLP.
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SECTION – III
The time frame of promoting different cadre of people
institutions (SHG, SHG Federation & Apex Federation) is
given below. As per the process guideline social mobilisation
and promotion of different community level institutions
need to be promoted within the confined time period. In a
span of one year, SHG Federation need to be formed. After
completion of two and half years, Apex Federation needs to
be registered so that programme will have ample time to
strengthen and nurture it properly.
Time frame for Promoting DifferentCadre of People's Institutions
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Time line for Promotion & registration of CBOs
Activity Group Promotion/Strengthening interaction promoter interaction Apex
groups (Federation level) selection Federation
Time line in Months 6 6 6 6 6 6
Cumulative time 6 12 18 24 30 36line in months
SHG leaders’ Leaders & Promoters Registering Saturation
SECTION – IV
Management and Staffing Pattern
The management unit is formulated to facilitate and
monitor, day today activity of the Apex Federation, facilitate
the performance as well as deal with the issues of the SHG
Federation at the MWS level federations and SHG at village
level. The unit manage on around 75-100 active SHGs
Federated under the block.
The management team will consist of 1 block integrator who
is basically the social expert from OTELP project, the board
members, the elected representative of the board and total
of 10 CSP provided under OTELP. The block integrator will
supervise over all work of the Apex Federation. The team of
10 CSP will look at the functioning of 10 MWSs in one block
(1 CSP per MWS). The size will vary depending on the MWS
under a block. Every month, performance review of CSP can
be assessed at block level, where Block Integrator and board
members will take active part in this process for necessary
payment of the concerned CSP. This process helps in,
enhancing managerial capacity of the board members and
creates a feeling of responsibility and ownership, which is
very much required for, sustainable of the institutions.
PART-A
Operational Management
To operate the SHG apex institutions, operational of the
management unit plays key role in making an institution
sustainable. Persons involved in operational management of
people institutions are leaders in SHG, SHG Federation &
Apex Federation, management unit i.e. CSP & social expert
along with board members. Proper facilitation and capacity
building of the leaders help them in taking care of their
institutions.
a) The management units need to prepare vision documents
for a span of seven years and each year it has to be
revisited and modify as per the current requirement
b) Annual plan (savings, credit, institutions promotion,
training etc) can be prepared at all level of pyramid and
further consolidated for guidance of a management
unit.
c) The management unit needs to prepare a report based
on total loan proposals received, loan disbursed, and
repayment status / loan outstanding on a monthly basis
and analyze to figure out fund shortage as well as
unused funds.
d) Monthly review meeting can be organized at Apex
Federation level to declare the closing balance and fund
flow status. This can be facilitated by social expert to
build the capacity of the leaders as well as different
institutions.
e) New themes or concept or refresher course of
capacity building of leaders or any activities can be
introduced in the meeting agenda for approval of the
house.
f) Monthly review of CSP performance will be done by
the executive body of Apex Federation Performance
depends in the quality and efficiency in delivering the
deliverables of CSPs. Suggestions and opinion is
highly recommended by leaders from each
federation.
g) Every month SHG, SHG Federation and Apex
Federation meeting need to be conducted in a
particular date where all issues & concerns can be
shared along with best practices, which will be learning
for others.
h) Utmost care can be taken for strengthening their
capacity in terms of owning & managing institutions,
mutual trust & belief, maintaining books of account,
financial management, vision building, planning to
attend goal, taking review of CSP, mainstreaming
collaboration etc.
PART-B
Financial Management
Financial management at each level of institution plays very
critical role in regards to financial sustainability of an
institution. The institution can deliver the services even after
withdrawal of support of funding agencies, provided if it
attains financial self-sufficiency. It implies that, the institute
should be capable enough to generate funds for meeting its
management expenses. It is noteworthy to mention that,
Apex Federation will provide the following deliverables with
certain financial gain as follows:
Business Activities: Apex Federation will take a share of the
profit generated out of the business activity initiated in a
collective manner. The Apex Federation will strengthen the
forward linkage and facilitate the backward linkage for any
business activity. It will also provide marketing support and
logistic arrangement to the members involved under
different activities. For example: Apex Federation may initiate
activities like NTFP collection and value addition, initiate
livelihoods activities such as poultry, goatery, fishery etc.
Extends Service to different institutions/individuals: The
Apex Federation will develop a detailed analysis of the
livelihood activities that need to be initiated through the
SHG and Federation level. The detailed deliverables with
respect of the activities need to plan and regular services
through CSP will be provided to SHGs and SHG Federations
has to be provided in a consistent manner. The Apex
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Federation or SHG Federation may seek service charge
from the group but not from the members as per the
sustainable plan of Apex Federation. The service charge is to
be levied @10% on income of a SHG or will be decided at
Apex Federation meeting.
Collaboration with banks, Government organisations
and other financial institutions for financial inclusion.
Loan availed by Apex Federation from other sources
will be lent to SHG and SHG Federation@ 18% interest /
annum.
Apex Federation will not hold the RFS receives from
OTELP. The entire amount will be given to SHG
Federation to be further revolved among the SHGs.
All SHG under each SHG Federation need to pay
entrance/ membership fee of Rs.50 and subsequently
annual subscription fee of Rs. 50 to receive facilities
under Apex Federation.
SHGs / Individual members can also purchase equity
share for demanding ownership at Apex Federation level
as the case may be. In case of SHG Rs. 500 and individual
members Rs. 50 will be collected as one time deposit and
refundable only when members leave, die or want to
surrender
SHG Federation and Apex Federation need to forecast
the amount to be demanded by the groups and rest of
the money can be used for better investment.
Financial Responsibility of Apex Federation
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Indicates financial transaction
Indicates Governance and monitoring system
Self Help Group
(Village level)
Apex Federation
(Block Level) Local Bank
(Block level)
Apex Institutions
SHG Federation
(MWS Level)
Financial and governance structure ofpeople Institution
Deliverable by the promoting agency (FNGO)
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Eligible families need to be brought under the institutional arrangements within the first three years of programme
implementation and strengthening of apex institution.
There should be a detailed exit plan and role of outlined for handling the management cost by Apex Federation.
Plans of for handholding support (invisible support) for strengthening the institutions to be sustainable
Financial responsibility of SHG Federation
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Financial responsibility of the SHG
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SHG will pay an entry/membership fees Rs.50 to join
the federation and subsequently subscription fees
annually.
OTELP will place the RFS fund meant for MWS at the
SHG Federation which will be revolved@ 18%
interest per annum between SHG.
SHG has makes loan request with proper procedures.
After proper assessment by the Federation Appraisal
team, loan will be disbursed from Federation to SHGs
Members need to pay entrance fees of Rs. 5/- when
joined in SHG and subsequently renewal fee or
subscription fee annually so that people will feel their
ownership.
Regular monthly Savings & credit should be the
mandatory thrift. The monthly pooled amount of
savings need to be inter-lend@ 18% /annum among
the member with optimum rotations to meet the
primary requirements of the member by fulfilling all
required procedures.
Group has to deposit the excess amount left after
inter-lending in the savings bank of their area to avoid
misappropriation of fund can be avoided.
Any deviation from the group norms/byelaws need to
be compensated by penalty.
SHG can avail loan directly from the bank provided
fulfilling all banking requirements with due approval of
SHG Federation.
Report Part of the Software
A. The Demand Sheet:
This report reflects the savings and instalments with
dates, each member is supposed to give in a SHG
meeting. The transactions need to take place as per
the demand sheet. This sheet will be return back to
office for further data entry.
B. Receipt & Payment Report:
This is otherwise termed as Cash Book of a SHG. This
report is generated after entry of all transaction
recorded in the demand sheet of a particular meeting.
This is supposed to be kept at SHG level for their
record. The necessary file may be opened at SHG level,
in place of Cashbook for future reference.
C. Balance Sheet:
This report reflects about the assets and liabilities of
SHG. For example members' savings, corpus
generated out of loan rotation, loan from others etc.
shall come under liabilities of SHG. Loan to members,
cash at bank, cash in hand and investment on IGA etc
shall be treated as assets of SHG.
D. Members Confirmation:
Member's savings and updated loan outstanding is
reflected. This report may be kept at SHG level for their
reference.
E. Other Reports:
Bankbook, loan book, members' transaction details are
also available for SHG.
SECTION – V
On part of a project, MIS plays key role in collection of data,
consolidation and generating report, which helps block
integrator to take appropriate decision in time. All these
staffs of management unit will provide data and seek report
for day-to-day management. The concerned CSP needs to
conduct SHG meeting with the help of Demand sheet
generated by software. This need to be filled up by CSP in
the SHG meeting and the same should be submitted at
Apex Federation office for putting the data in software. The
report generated by the software to be shared with the
concerned SHG in next meeting. One copy of the same
report will be kept at SHG level and only demand sheet will
be taken back by CSP.
MIS will be maintained at the Apex Federation level. The
social expert or a MIS can be allotted to maintain the MIS
and enter the data in a regular basis for generating report,
which helps block integrator to take appropriate decision in
time. The data will be collected from the SHG at the village
level and will be compiled at the Apex Federation level. The
CSP will initiate the process with collection of data during
the SHG meeting as per the demand sheet format. A copy
Management Information System
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of the same will be retained at SHG level with immediately
submission and compilation at the Apex Federation level.
Subsequently reports will be generated village wise, SHG
Federation wise to be disseminated to the respective levels
and discussed during the meeting at each level.
A detailed guideline on operational aspects of SHG
Software is prepared. The highlights of the guidelines are
given below:
1. Block wise user ID and password is created and
assigned.
2. Base line data (Member, SHG, Village, Panchayat, SHG
Federation, Block etc)
3. Opening Cash & Bank details,
4. Opening Loan details (Member, SHG, SHG Federation,
Bank etc.)
5. Fresh loan & Transaction details as per demand sheet
6. Minutes book can be introduces at SHG level for
recording the discussion of the group
Entry Part in Software
13
Financial support to the families is provided through the
programme component RFS. This fund is meant to facilitate in
fulfilling financial regarding livelihood activities, domestic/
consumption purpose and initiation of business activities by
members of SHG, SHG Federation and Apex Federation level.
The RFS fund is calculated on the basis of treatable area of
MWSs and the same amount will be kept and managed by SHG
Federation promoted at MWS level. Approximately 10-20
SHGs (200 women/ HH) will be benefited from this RFS fund.
SHG Federation will request for additional RFS to the Apex
Federation through a written request and subjected to the
submission of a viable credit plan of SHG. In order to meet the
demand of SHG, Apex Federation reserves the right of taking
back the unutilized RFS fund available with SHG Federation and
meets the needs of the other desired federations.
Allotment: Rs.2.25lakh/MWS {(Rs.450/Ha.)*(500 Ha /MWS}
A total of Rs. 22.50 lakh for 10 MWS /10 SHG Federations at
block level
Allotment: Rs. 50,000 {Rs. 100/Ha * 500Ha/MWS}
A total of Rs.5, 00,000 for 10 MWS /10 SHG Federations at block level
Revolving fund: The amount to be given to SHG and
revolved among them
Seed Capital
Start-up kits: This amount is a support fund provided to the
SHG in order to raise the corpus.
Allotment: Rs 7,500 {Rs.15/Ha * 500Ha/ MWS}
A total of Rs 75, 000 for 10MWS /10 SHG Federations at block
level.
1. Satisfactory SHG Status (Functionality, conduction of
meeting, monthly transaction etc.)
2. Regular SHGs participation in SHG Federation monthly
meeting.
3. Good performing SHG as per OLM SHG gradation criteria,
grade-II SHGs are eligible for seed capital.
4. Revolving support will be given to SHG needy for extra fund
to facilitate their business activity or livelihoods related to
agriculture.
A performance review committee will be formulated comprising
of few leaders (2-3) from the federation. This committee will
visit all SHGs in the federation and assess their performance for
seed capital disbursement. It will also facilitate gradation as per
OLM SHG gradation at MWS level with the presence of VDC
members and support with revolving fund to Grade-II SHGs.
The team will also provide necessary assistance to the poor
PART-ACriteria for Seed Capital Disbursement to SHG
performing SHG and Grade-I SHG to be capable to avail seed
capital and revolving fund support. Leaders of SHGs
participating in federation meeting will ventilate the proceeding
of the meeting to their other members in the respective SHG
meeting.
The SHG Federation can design and provide two types of
loan product such as;
1. Regular loan
a. Consumption Loan (Festivals, social gathering, marriage,
education, housing, debt redemption etc.)
b. Production Loan–Long term Loan (Business,
agriculture, livestock dev. Etc.)
2. Emergency loan (Medical, fire accident, Natural calamities,
death etc.)
1) A member can avail any type of loan, which depends on her
amount of saving with the SHG. In case of a SHG availing
loan from a federation, the pooled amount of corpus of the
SHG will be considered while sanctioning loan. The corpus st nd& credit ratio will be 1:2 for 1 loan, 1:3 for 2 Loan and 1:4
rdfor 3 Loan and will continue with accordingly
2) Each loan will follow appraisal process and certain
relaxation will be given for emergency loan cases. In case of
emergency loan, SHG can call an emergency meeting to
avail loan from SHG Federation. In the same way the SHG
Federation may call emergency meeting and sanction the rdamount as per provision with the presence of 2/3
members.
i. In case of emergency, appraisal process may be
suspended but the SHG need to request for financial
assistance on behalf of the victim because ultimately
SHG will be held responsible for repayment
ii. The interest rate may be relaxed up to zero
iii. Apex federation may facilitate for providing assistance
in terms of kinds or money mobilising from members or
SHG as a whole
iv. Emergency loan may be mobilised from external agency
like Block office or grant from Government
organisations or financial institutions.
3) Only SHG can avail loan from federation, individual seeking
loan from federation needs to be discouraged.
i. Loan need not to be distributed equally among all
members in a group rather it can be disbursed as per
capacity and capability of a member.
ii. It helps in enhancing active loan portfolio and reduces
defaulter
iii. Apex federation has right to take money back from the
SHG Federation if any SHG Federation could not
disburse / utilised its revolving fund
iv. The same may be returned with a proper
requirements of the SHG Federation
PART-B
PART-C
Designing Loan Product for SHG
Criteria for Loan Sanction & Disbursement to SHG
4) SHG needs to provide certain collateral in terms of patta
i.e. land right, bank pass book, ration card etc. to SHG
Federation to avail loan. The respective SHGs and its
Federation can decide the criteria. Ex: 1 acre of Patta:
Rs. 10000/-
5) Single loan concept can be developed in SHG Federation,
so as to ensure repayment. It means until the first loan is
fully repaid, the second loan will not be given to the same
individual or SHG as the case may be. But in case of
emergency, second loan can be thought of.
6) One SHG will be the guarantor for another SHG while
taking regular loan in the same SHG Federation. Until the
SHG repays the full amount of loan the guarantor SHG
cannot avail loan. But in case of emergency SHG guarantor is
not required but other formality need to be fulfilled.
1. SHG needs to prepare activity plan (MIP) in case of
regular loan and submit it to Federation
2. The SHG need to give application form to the federation
for availing loan either from RFS fund or other Financial
Institute.
3. The core committee (2-3 Leaders) within the federation
is to be formed and facilitate the process of loan appraisal,
sanction, disbursement & recovery and submit to the
federation for further decision.
4. The concerned appraisal committee will visit the SHG
verify the records; assess the requirements and the purposes
of loan demand and its possibility followed by linkages.
5. The committee reserve the right to disqualify the loan
proposal if they do not feel its suitability or non-
performing SHG
6. The core committee members & governing body of SHG
Federation take a decision on sanctioning loan to
particular SHG based on the documents submitted by
SHG and assessment report by the concern committee.
7. If any SHG requires more than the ceiling amount from
SHG Federation. The Apex Federation Core committee
(2-3 Leaders) will visit the SHG along with core
committee members of SHG Federation for field
verification for sanctioning necessary loan.
8. Members of the SHG Federation and Apex Federation
need to prepare lending principle upon which the loan will
be sanctioned and disbursed a. Regular monthly savings, b. Savings utilization, c. Members' attendance, d. Maintenance of SHG records, e. Adhering group norms, f. Repayment performance etc.
9. Federation to ensure the loan taken by the group is
actually utilized for the activity for which loan is disbursed.
Similarly SHG to ensure the same while loan taken by the
individual members.
PART-DProcess to be followed for Sanction & Disbursement
of loan to SHG
14 15
SECTION – VI
Provision of Funds under Rural Financial
Service and its Management
Access to formal financial services in tribal domain is at stake.
Addressing this issue along with developing a proper system
to ensure better repayment and the best utilization of
financial services is need of the hour. The management unit
of the nested institutions i.e. SHG, SHG Federation (Cluster)
&Apex Federation need to practices certain lending
principles at different level for providing better financial
services to all poor families with a sustainable manner.
Norms to be followed for loan (Followed at group level for internal and external loan)
Only group members are eligible to avail loan
Members should state the purpose and the repayment
period clearly while requesting for loan.
The loan request, sanctioning and the repayment
should happen in the group meeting only
The maximum loan limit availed per member depends
upon her savings and savings of the guarantor i.e. if a
member wants to avail loan of Rs. 5000, the pulled
PART-ALending principles at SHG level
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amount of savings (herself & guarantor) must be equal
amount of loan request.
Until the concerned member repays the full amount of
loan the guarantor as well as same person cannot avail
another loan again.
The member absorption capacity and credit worthiness
should be accessed by providing smaller loans initially
and then move to larger loan (no member should be
provided larger loan without accessing their
repayment capacity)
Most needy member with credit worthiness should be
preferred while sanctioning loan
Member should be provided 1:2, 1:3 & 1:4 ratio
(Savings: loan ratio)
Each member's loan application should be processed
in the group meeting. The members of the group
should accept the loan processed
Member should pay the loan amount and the interest
due fully as per installment.
Preferably the loan amount disbursal should be done
during regular group meeting only. It should not be
done in any other time.
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1) Loan appraisal:
1) Member eligibility:
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The loan request should be given at least one-month
prior and it should be copied in the minute's book and
signed by all the members. The loan sanctioned and
the details should also appear in the group meeting
minutes.
The critical loan appraisal process followed with linkage
stops more extend defaulter. The more the loan amount,
the more the risk of delinquency. The higher the following
responsible representatives should do the loan amount,
appraisal or assessment. Involvement of leaders in loan
appraisal process strengthen their participations and carry
ownership and gives a space of owning institutions which is
very important for managing a peoples institution.
The person taking loan should be the member of
the group
The member should have >80% attendance and
good regular savings record (90%)
The member eligibility should be based on the
savings, repayment capacity and the credit
worthiness
The maximum loan limit availed per member
depends upon her savings and savings of the
guarantor i.e. if a member wants to avail loan of
Rs. 5000, the pulled amount of savings (herself &
guarantor) must be equal to the amount of loan
request
Loan should be provided according to the need and
the absorption capacity of the member
The interest rate should be fixed for the loan, which
can be 24% p.a.
For providing second loan, the first loan's repayment
status should be accessed. If the repayment is poor,
the second loan should not be provided.
PART-B
Lending principles at SHG Federation Level
1) Loan Appraisal:
2) Eligibility criteria for SHG to avail linkages
(Bank, RFS &Financial Institutions)
a. A SHG, Fulfilling above eligibility criteria can apply
for external linkage (Bank, RFS or Fis)
b. The concerned SHGs should give request with
resolution duly signed by all members along with list
of activities (member wise) for which loan is
required.
c. As per the above mentioned loan ceiling limit,
appraisal team need to visit the SHG
d. SHG need to provide certain collateral in terms of
Xerox patta, bank pass book, ration card, BPL card.
e. The credit will be linked with the pulled amount of
corpus available with SHG i.e. 1:2, 1:3 & 1:4
f. SHG is responsible for any loss or defaulter of loan
a) SHG should be a member of SHG Federation
b) Attending regular monthly SHG Federation
meeting (80%)
c) Conducting regular SHG meeting (80%)
d) Ensuring good attendance at SHG meeting (80%)
e) Collection of regular monthly savings (95%)
f) Strong internal lending (90% savings utilization)
g) The internal loan should be availed by 60% of
members
h) Good track record of members level repayments of
internal loan (90%)
i) Maintaining and updating books of account
properly
j) Adhering norm
SECTION – VII
Lending Principles
16 17
Loan amount(per member)
Upto Rs. 10000
Upto Rs. 15000
Upto Rs. 20000
>Rs. 20000
Appraiser
Group leaders
Federation leaders
Apex Federation leaders
Apex Federation leaders Block Integrator
Block Integrator
CSP
Appraising facilitated by
CSP
A self sufficient Apex Federation can revolve the RFS in an effective manner to sustain the institution An indicative business
model is prepared showing different sources of finance come to Apex Federation and different expenditure made with a
sustainable manner.
SECTION – VIII
Proposed Business Model
18 19
Fund Flow Management and Income of an Institution for five years
Sl no
Particulars FY 1 FY 2 FY 3 FY 4 FY 5 Assumption
Figures
1 No of SHG 75 75 75 75 75 All are active SHGs
2 Total no of members 750 750 750 750 750 Avg. member size 10
3 Savings per month in Rs. 360000 360000 360000 360000 360000 Active memb.750 *Rs.40( member/month)*12 months
4 Cumulative savings in Rs. 360000 720000 1080000 1440000 1800000
5 Grant to SHGs (Rs.15000/SHG)
1125000 1125000 1125000 1125000 1125000 Rs.15000/SHG grant from RFS fund
6 Cumulative total of SHG Own Fund in Rs.
1485000 1845000 2205000 2565000 2925000 Total of cumulative savings + grant to SHG Rs.15000
7 Total Utilizations of SHG Own Fund in Rs.
1188000 1476000 1764000 2052000 2340000 It is assumed that at least 80% of total of cumulative of SHG Own fund (savings + grant to SHG) should be utilized
8 External Fund mobilization (Bank, FI s) in Rs
1425600 1771200 2116800 2462400 2808000 It is assumed that at least Fund mobilization ratio from external sources should be in 1:1.2 ratio of the total utilization of SHG own fund
9 Grand total of SHG fund utilization (Own fund + External fund) in Rs.
2613600 3247200 3880800 4514400 5148000 Total utilization of SHG own fund + External fund mobilization
10 Gross Interest I ncome earned by SHGs from (Own fund + External fund) in Rs.
470448 584496 698544 812592 926640 Interest rate 18%/annum
11 Interest to be paid on External fund mobilization
185328 230256 275184 320112 365040 Interest on external fund mobilization @ rate 13%
12 Net interest income earned by SHGs in Rs.
285120 354240 423360 492480 561600 Gross interest income earned by SHGs (Own fund + External fund) - Interest paid to external funding agency
13 RF with SHG Federation after disbursement of grant Rs.15000/SHG
1625000 1625000 1625000 1625000 1625000 Total RFS fund @ 550/ha*5000ha-Rs.15000/SHG as a grant
14 Interest income earned by SHG Fed. f rom RF in Rs.
292500 292500 292500 292500 292500 Interest @ 18%/annum
15 Cumulative Interest income earned by SHG Fed. from RF
292500 585000 877500 1170000 1462500
16 Service Charge Collection from SHG (service as delegated to CSP) in Rs.
28512 35424 42336 49248 56160 It is assumed that at least 10% of net income earned by SHGs should be used as cost to institution as service charge
17 Cumulative Service Charge Collection from SHG (service as delegated to CSP) in Rs.
28512 63936 106272 155520 211680
18 Income earned by Apex Federation /SHG Federation from Business Activity in Rs.
IfApex Federation / SHG fed. involved in business activity
19 Total Income of Apex Federation in Rs.
321012 648936 983772 1325520 1674180 Interest earned by Fed. + Service Charge collection + income from Business activities)
Monthly Expenditure
Yearly Expenditure
in Rs.
l no A/C Head Particulars Amount in Rs Year 1
1 Administration Expenditure
Office Rent 2000 24000
Stationary 300 3600
Xerox 300 3600
Office maintenance 200 2400
Phone 500 6000
2 Capacity building training
CM 500 6000
Community 500 6000
Staffs 500 6000
3 Allowance Block Integrator (1) 10000 120000
CM (5) 15000 180000
4 Total 29800 357600
1. It is assumed that 5 CSPs along with 1 Block Integrator
(social expert)shall manage to provide services to 75
active groups approximately. But as per programme
provision 1 CSP to be engaged for 1 SHG Federation i.e
10 CSP for 10 MWS, up to the programme period.
2. End of the programme period, staff reshuffling is
required. 5 best CSP can be retained with proper
process. One CSP can easily cover on an average of 200
families or 20 SHGs approx. in 2 SHG Federations. The
projected expense to be incurred during the operation is
Rs. 357600 for a period of one year and income earned
by the Apex Federation is only Rs. 321012 excluding
income earned by Apex Federation from its business.
But subsequently the Apex Federation earns profit.
3. Service charge collection is not an easy task but needs
good motivation and social mobilisation by promoting
agency (FNGO). Block Integrator (Social expert) should
orient leaders of the SHG Federation along with CSPs on
service charge collection. They should be trained on
importance of institutions, its functioning, services
delivered, cost incurred during the operation of
programme and sustainability of the institutions.
4. CSP and Social Expert need to facilitate federation
leaders to percolate service charge in SHG meeting at
village level. The process of concept seeding of service
charge collection should be initiated from the beginning rdand implement it 3 year onwards. Hence the
programme will have ample time to facilitate in such a
way that the institutions will progress as per the business
model mentioned above.
5. As planned service charge shall be collected by the SHG
Federation and will be deposited at Apex Federation
account. This amount will not be spent as expenditure thup to the completion of 7 year because financial
implication will be supported by the Programme.
6. The income generated in each year at Apex level need to
be reinvested for enhancing corpus fund .th7. 5 years onwards social expert, CSP and leaders of the
Apex Federation should manage the above activities
without seeking support from ITDA or FNGO
8. After withdrawal of programme the Apex Federation
can manage on its own. Instead of social expert they can
recruit experienced graduate.
9. 5 CSP and 1 block integrator will run the institutions with
the help of community and overall supervision by ITDA.thAt the end of 7 year an Apex Federation will have a corpus
of Rs. 32.99 lakh (Rs. 16.25 lakh as revolving fund + 16.74
lakh as income to apex fed.). If the Apex Federation is able to
manage funds as mentioned in the table it will be financially
sustainable.
SECTION – VIII
Sustainable Exit Strategy
20